Nestlé takes bite of fair trade firm

Nestlé will this week acquire a stake in a leading independent British supplier of fair-trade chocolate as part of L'Oréal's purchase of Body Shop.

This means the world's biggest food and drinks group will become an investor in the Day Chocolate Company, which makes Divine and Dubble bars as well as all the Fairtrade own-brand chocolate for the Co-operative Group.

Nestlé owns more than a quarter of the French cosmetics multinational L'Oréal, which is about to purchase Body Shop International for £652m. The Body Shop, in turn, owns 14% of Day.

The Swiss company has long been a target of campaign groups and the L'Oréal acquisition of Body Shop, which is expected to be approved by regulators on Wednesday, has brought the Swiss multinational into the spotlight again. A call to boycott all the company's products began almost 30 years ago, because of the way it markets its baby-milk formula in developing countries, and there are protest groups in 20 countries.

Now experts in ethical trading are watching how Nestlé will use its muscle in the fair-trade chocolate sector. A Nestlé spokeswoman said it had no plans to bring out its own fair-trade chocolate products.

There are also fears that Nestlé's reputation may affect sales of Divine. The Day Chocolate Company itself does not know what to expect from its new shareholder. "We are seeking clarification on our position," said a spokeswoman for Day. The Co-operative Group, Day's largest customer, would not comment on the implications until L'Oréal completed its acquisition of Body Shop.

Growing demand for fairly traded goods is attracting established players. In May 2005 Cadbury-Schweppes bought the organic chocolate maker Green & Black's, whose Maya Gold was the first product to be awarded the Fairtrade mark. Nestlé launched a Fairtrade instant coffee in Britain last year.